The International Fertilizer Industry Association (IFA) released its Medium-Term Fertilizer Outlook 2012-2016 in mid-June, reporting that demand for fertilizer is steadily increasing in response to supportive agricultural market fundamentals, while expansion of supply is still delayed because of schedule slippages for about half of projects.
IFA said tight market conditions for corn and oilseeds provide strong incentives for farmers to increase productivity and optimize their return. As a result, world fertilizer demand is seen as up by 2.8 percent in 2011/12, and by another 2.5 percent in 2012/13, reaching 181 million mt of nutrients (nitrogen, phosphate, and potassium). When compared to 2007/08 before the economic downturn, IFA said world fertilizer demand is anticipated to have fully recovered by 2012/13, including for potash. During this five-year period, South Asia alone is forecast to account for approximately 60 percent of the net increase in global demand.
World demand is projected to reach 193 million mt by 2016/17, corresponding to a compound annual growth rate of 2.1 percent from 2009/10 to 2011/12. IFA said the average annual growth will be stronger for potash (3.7 percent per year) than for phosphates (2.3 percent) and nitrogen (1.5 percent) because the nitrogen and phosphate markets have recovered faster than potash, and because there is an urgent need to rebalance fertilization to the benefit of potash in several developing countries.
“In the next five years, reduced inventories and strong crop prices are expected to persist in the agricultural commodity markets because of the need to supply the fast-rising food, feed, fibre, and bioenergy markets,” said Patrick Heffer, director of the IFA’s Agriculture Service. “This is anticipated to stimulate fertilizer demand, but high crop price volatility could result in significant year-on-year variations.”
Contrary to historical trends, IFA said Asia’s weight in regard to global growth is progressively declining, while Latin America is seen as reinforcing its position as an engine of future expansion. Demand is anticipated to rise firmly in Eastern Europe and Central Asia, as well as in Africa. In volume terms, IFA said East Asia, South Asia, and Latin America together would account for three-quarters of the increase in world demand during the next five years.
On the supply side, global total nutrient sales for all uses reached 221 million mt nutrients in 2011, increasing 4 percent from 2010 due to firm demand in the fertilizer sector and a gradual recovery in the industrial segments. World total nutrient sales in the fertilizer and industrial sectors in 2016 are forecast to grow at an average annual rate of 1.8 percent, to 245 million mt nutrients in 2016.
Close to 250 new fertilizer plants are projected to come on stream over the next five years, corresponding to a total investment in excess of US$90 billion. However, about half of these projects have faced delays of 6 to 18 months. Schedule slippages have slowed down the projected growth of capacity and have led to more balanced market conditions in the short term, IFA said, while lowering the levels of potential surpluses in the near term.
According to IFA, global nitrogen capacity is projected to expand 17-25 percent compared with 2011, leading to large potential surpluses by 2015. Phosphoric acid and phosphate fertilizer capacity would expand by 20 percent, but global phosphate demand is projected to grow at similar rates, thus absorbing most of the projected incremental supply. In the potash segment, world capacity may increase by 42 percent, while demand expands by 14 percent. IFA cautioned, however, that most potash projects suffer from delays, slowing down the emergence of massive surpluses in the short to the medium term.
In the near term, IFA said that trade prospects appear strong for m